If you are thinking about investing for the first time, you are not alone.
There are currently over 4.5 million tenants in the UK which makes it an ideal spot for buy-to-let investment.
Before entering what is considered a lucrative asset class, you should consider exactly what you want to achieve from your buy-to-let investment.
If you are thinking of becoming a first time landlord, consider these 5 questions by Experience Invest before you buy.
Who is your ideal tenant?
Before investing for the first time, it would be wise to consider who you would like to rent your property out to.
Then ask yourself, “Is the property ideal for that market?”
Each demographic has different needs and desires so it would be a good idea to establish what boxes your property will tick.
The needs of young professionals will vary from those with families, older tenants and students.
Consider the location and if it matches up with your tenant. For example, those with a young family will be attracted to school districts and green space; young professionals will be drawn to city centre living with good transport links and amenities on the doorstep.
Make sure your property is in an attractive area for your chosen demographic to ensure success.
Where should you invest?
Once you have established your ideal tenant, it would be a good idea to consider where to invest.
Here are a few pitfalls landlords should avoid…
The bright lights of London may seem attractive however, with average property prices around half a million pounds, investors may not achieve the rental yield that they are looking for.
Further afield in Manchester, Leeds and Liverpool, investors are able to purchase property at a lower price and secure rental returns much higher than in the capital.
Just like these buy-to-let apartments in Manchester.
There is a high demand for rental properties in the Northern Powerhouse and with rising levels of investment in these areas, landlords have a better selection of opportunities offering higher rental returns.
Commuter belt towns and cities are also worth considering.
In recent years, rising property and rental prices in London have driven people outside of the capital.
Locations with good transport links into the city – in areas such as Luton – will also provide landlords with ample scope for high returns.
What is the ideal length of your investment?
The UK’s buy-to-let market has been the talk of the town over the past few years.
As a first time investor, you should look beyond the hype and really consider what you hope to achieve and the time frame you hope to achieve it in.
After all, UK buy-to-let is not a way to make quick returns.
Successful landlords and investors know that purchasing the right stock will generate a passive rental return for many years to come. They look at their purchase as a mid-to long-term investment, with income building over the span of years rather than straight away.
This strategy can be applied by first time investors.
Yes, there are opportunities to buy below market value property and flip it for a profit however, that is a different approach.
If that is what you hope to achieve, are you really ready to buy a rental property?
Do you have time to manage the property properly?
You are investing for the first time. You have found the right apartment in the right location which is perfect for your demographic.
So what’s next?
You should consider whether you will have enough time to become a landlord. How will you cope with your new responsibilities?
From conducting tenant checks to complying to health and safety, from maintenance and repairs to building checks, owning a buy-to-let can be time consuming.
Appointing a reputable management company may be the way forward for those who are not ready to become a full time landlord.
The UK’s Build-to-Rent sector is also proving landlords and investors with a better option for rental returns.
As the development is built with the rental market in mind, they tend to have a specialist management company appointed to look after the property and lettings. This structure allows landlords to generate a passive return from a fully managed apartment.
Buy-to-Rent may be a better option for those dipping their toes into the sector. Equally, those with a large property portfolio will benefit from an additional, hands-off asset.
Do you want to build a property portfolio?
Did you know that in the UK, 90% of landlords own just one rental property?
If you are considering expanding your property portfolio, it is a great idea to consider a selection of asset classes such as student, commercial and even healthcare property.
The idea behind this strategy is to help balance your property portfolio and to safeguard it against market fluctuations.
Watch this short video to find out more about diversifying your property portfolio.
If you wish to expand your property portfolio, consider the above questions when approaching a new asset class.
If you are consider investing for the first time, contact Experience Invest to find out more about our latest high yielding buy-to-let opportunities.